Know Your Client & Suitability

Client knowledge begins with complete information about a client’s financial affairs. We treat the privacy and security of your personal information and account details – very seriously. We will never disclose such information to third parties without your prior written approval.

Investment suitability is the foundation upon which good investment advice is built. Not only must your portfolio suit your return requirements but also your risk capacity and risk tolerance. Tolerance for risk is a key to assessing your probable level of comfort with your investing choices.

Client Risk Preferences

A well-informed client is an important key to investment success and financial confidence. WDS wealth managers are trained to help their clients deal effectively with the prospect of investment risk. In the field of wealth management, investment risk is commonly defined as the possibility of permanent losses being incurred or the potential for below-target returns.

WDS believes in full disclosure and transparent, open and honest communications with clients before implementing an investment strategy. We provide our clients with education about market cycles and what to expect, beforehand.

Tolerance for Investment Risk

Investor’s don’t like surprises, especially when it concerns their investments

At WDS our job is to help clients develop an investment strategy that is consistent with their personal risk tolerance and investment objectives. This balance point is called investor suitability.

What is risk tolerance? Broadly speaking, risk tolerance is an individual’s psychological willingness to undertake a non-guaranteed course of action. But when it comes to personal investing it usually relates to someone’s ability to stomach market downturns.

Risk tolerance does not map to a “portfolio” but provides a personality characteristic - much like IQ - relative to others. It’s a conversation starter to evaluate a suitable asset allocation strategy for our client’s money. As a result, clients gain a better sense of the risk with respect to their expectation for returns.

Concept of Risk

Trade-off decisions

Most of us know risk as volatility, or the extent to which the market value of securities fluctuate. In a portfolio, much of the volatility comes from market movement, in which we voluntarily participate. But investment risk takes several less obvious forms, too. They can be just as important in reaching your financial goals.

Currency risk: arising from the change in price of one currency relative to another.

Financial risk: the dollar or percentage decline an investor can accept, given their need for capital preservation, income and overall level of wealth.

Inflation risk: the chance that investment returns won’t keep pace with inflation over time, and consequently erode the investor’s purchasing power.

Liquidity risk: possible losses arising from situations in which there is not enough cash to meet investors’ immediate needs.

Longevity risk: that an investor outlives their money.

Portfolio evaluation invariably involves trade-off decisions. A suitable portfolio is one that best fits a client’s present and future needs given their current financial circumstances.

Accepting risk

Decisions with clients’ informed consent

At WDS, we take a more fundamental approach to the unpredictable nature and mood of markets. True investment risk is the permanent loss of buying power in our clients’ original capital. A permanent loss of capital can arise from three sources:

Fundamental risk: problems with the company or the industry in which it operates; erodes future earnings power with permanent decline to the intrinsic value of the business.

Market risk: potential for an investor to experience losses from the fluctuations in securities prices by selling at the wrong time.

Concentrating on the first two aspects of risk, we remain vigilant in evaluating securities and sensitive to their current pricing. With your guidance and cooperation, we try to avoid the last one. Sensible investing is about taking desirable and suitable risk in your portfolio.

Learn more about our services!Call us at (613) 725-1800

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About Us

Our focus is our clients. As wealth managers we value our relationships and we are deeply aware of the trust that has been placed in our hands. Dealing with private clients’ means dealing with more than just managing wealth; it means managing relationships, emotions, needs, and goals.